Question

Holly Company prepared the following budgeted income statement for the first quarter of 2016:

Holly Company is considering two options. Option 1 is to increase advertising by $ 1,000 per month. Option 2 is to use better- quality materials in the manufacturing process. The better materials will increase the cost of goods sold to 65% but will provide a better product at the same sales price. The marketing manager projects either option will result in sales increases of 20% per month rather than 10%.